Mexico’s Cemex, one of the largest cement companies in the world, reported on Thursday a 38% increase in second-quarter profit to $318 million on the back of a 5% decline in sales.
According to Reuters, the company reported $4.13 billion in revenue for the quarter, while EBITDA decreased 11% to $823 million.
According to a poll by LSEG, the results came in broadly in line with analyst expectations.
The performance demonstrates an aggressive cost-slashing initiative under new Chief Executive Officer Jaime Muguiro, who assumed the role earlier this year after leading Cemex’s US businesses.
It was his first quarter at the helm of the company globally.
Layoffs and restructuring lead to cost reductions
A massive reorganisation plan launched earlier this year is at the heart of the company’s improved profitability.
Cemex revealed that thousands of jobs had already been lost, with more to come as the program goes forward.
In the second quarter, headcount declined 5% year on year, to around 43,000 employees.
Operating expenses fell 3% during the same period, owing to lower logistics and distribution costs.
Jaime Muguiro, the company’s Chief Executive Officer, stated in a press release that they began implementing a strategic framework to “move quickly” in the second quarter and transform their corporate structure by introducing a new operating model that streamlines administrative functions, fosters agility, and empowers regional teams to drive results.
He said:
This process involved difficult but necessary decisions to support the company’s long-term growth and competitiveness. I am convinced that this transformation will help us advance toward our goals of operational excellence and greater sustainable returns for our shareholders.
Muguiro acknowledged the impact of these measures in a statement, describing them as “difficult decisions,” but emphasised their importance for long-term competitiveness.
Cemex now anticipates the restructuring to generate $200 million in incremental EBITDA in 2024, up from its earlier projection of $150 million.
By 2027, cumulative savings from the cost-cutting drive are expected to reach $400 million, with workforce reductions accounting for half of that total.
Mixed regional performance
However, Cemex’s operating performance was uneven regionally, despite the boost to earnings. Volume declines were substantial in two of its main markets, Mexico and the United States.
Heavy rains in Mexico and a halt to government infrastructure projects under the new administration also weighed on demand.
Elsewhere, however, continued rains and weakness in residential construction put additional pressure on volumes in the US.
On the other hand, Cemex said its Middle-East & Africa segment performed well amid new housing and infrastructure developments, which more than compensated for weakness in its home markets.
Outlook: stable EBITDA with upside potential
While the company expects flat EBITDA for the entire year, management has signalled that there may be some upside.
The estimated $200 million increase from the restructuring plan may push core earnings slightly higher than expected, depending on market circumstances in the second part of the year.
Cemex’s strategic turn under Muguiro appears to be targeted at stabilising performance in the face of external headwinds, preparing the company for higher profitability even in a slower-growth environment.
With a lower cost base and evidence of resilience in emerging countries, Cemex believes that internal discipline will help offset decreased demand in major developed economies.
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